Exclusive Interview with Green Check Verified Founder and CEO Kevin Hart
Green Check Verified has worked to form a bridge between the highly regulated industries of cannabis and financial services to address the consistent banking challenge in the cannabis business. Today, the company is operating in 22 states with more than 400 cannabis businesses on its platform. Founder and CEO Kevin Hart spoke with New Cannabis Ventures about how the Green Check platform works, plans for expansion and how the outlook on cannabis banking is evolving. The audio of the entire conversation is available at the end of this written summary.
Launching Green Check Verified
Over the course of his career, Hart has run a number of global software companies. In 2015, he was contacted about the idea of launching a point-of-sale system for the cannabis industry. As he did research on the industry, he kept hearing about the banking challenge. With his background in technology, consumer packaged goods and complex supply chain solutions, he decided to focus his energies on creating a banking platform for the cannabis industry.
From the beginning, Green Check took a long-term view of the challenges around banking in cannabis. The team spent three years building the company before writing the first line of code, according to Hart. Now, Green Check has filed three patents for its technology processes.
Hart was not alone in launching the company. He and two other co-founders make up the core of Green Check. Paul Dunford brings his experience with client engagement and scale to the team, while Michael Kennedy uses his background in banking compliance software.
Green Check contracts with various financial institutions (including regional banks, community banks and credit unions) to help licensed cannabis companies open bank accounts. The platform is free for all cannabis companies to use while the financial institution pays by the account. Green Check does revenue share based on the flow of dollars through their program.
Green Check’s first step is making sure the process of opening an account is easy for both the financial institutions and the cannabis companies. Then, the platform manages transaction monitoring to ensure every single transaction is compliant with state regulations and bank policies. The company has automated the entire reporting structure for audit requirements on a single, streamlined platform, according to Hart.
In addition to its platform, Green Check offers financial institutions consulting services. The company helps its clients understand the value of cannabis banking and how to launch services for the cannabis industry. Green Check helps financial institutions understand how to communicate cannabis banking plans to their boards and examiners. The company also creates full financial models for banks to demonstrate what those new deposit dollars could mean. Finally, Green Check helps clients to define policies and procedures and enter the market in a compliant manner.
Green Check has a number of different client types. It has two publicly traded financial institutions, located on opposite coasts, which are in the process of bringing MSOs onto the platform. One of Green Check’s larger customers is aiming to bring 200 clients onto the Green Check platform by the end of the year, a goal that is more than halfway completed. The company also serves smaller credit unions.
Green Check tracks growth goals for the number of financial institutions, cannabis-related businesses and gross merchandise value run through the platform on a monthly basis. The company is currently ahead on all three goals, according to Hart.
During the pandemic, Green Check has been fielding an influx of inbound inquiries. Strategic financial institutions that are curious about cannabis are more interested in the opportunity during today’s challenging environment. The company also hosts cannabis banking webinars, which have helped drive leads. Green Check recently added two members to its business development team to handle its inbound inquiries.
As Green Check manages increased interest in its platform, it is also looking at the possibility of new markets and expanding its offerings. Initially, the company’s focus has been on emerging markets, but its ultimate goal is to be in all states with cannabis programs. The platform’s compliance rules engine allows for quick updates and seamless expansion of operations.
Green Check is also examining the expansion of its platform offerings. As financial institutions and cannabis companies establish relationships through Green Check, banks will have a high level of visibility into sales and deposit data. This creates an opportunity for lending services, according to Hart. The company is also looking at opportunities in the insurance market. All cannabis companies are currently considered high-risk, but information that demonstrates compliance could help change this dynamic, according to Hart.
As the company grows, it will leverage its ecosystem of trusted partners. Green Check works with partners in cash logistics, external audit and legal services, which the company can bring to its clients.
Hart bootstrapped the company for its first couple of years. In 2018, Green Check did a SAFE round and then a convertible note in 2019. It is currently in the midst of another convertible note round right now. To date, the company has raised $4 million in external funding with $1 million open right now, according to Hart.
Most of the company’s investors are financial and regulatory tech spaces; Green Check has one cannabis fund. Much of the early investment in cannabis was focused on brands and retail, according to Hart. But, the company has been fielding inquiries about the timeline for its Series A, which Hart sees as an encouraging sign. Green Check plans to do its Series A in late 2020 or early 2021.
Debt may also be an interesting approach to fundraising. Hart has done a number of raises using various methods over the years, and Green Check’s CFO Mukesh Kshatriya brings a lot of practical knowledge to the company’s approach to fundraising.
Green Check is on track to be cash-flow positive within a year, according to Hart. The company takes a disciplined approach to revenue growth, and it has a controlled burn rate. It is focused on onboarding more financial institutions, which will bring more cannabis companies to the platform. The Green Check platform has a low price point for the market, but it has an exceptional margin opportunity, according to Hart. As the business scales, the company does not need to add more and more people and technology.
As the company scales, it will be challenged to adapt to changing regulations and ensure technology integration–Green Check is POS system agnostic. It will also need to maintain a high level of diligence for its clients, particularly in regard to illicit market activity. Financial institutions need to know that all transactions are compliant.
The SAFE Banking Act is one of the biggest points of discussion in the cannabis banking space. The consensus seems to be that passage of that legislation is inevitable, but it will not be this year, and Hart agrees. Though it may take time to come to fruition, more banks are interested in entering cannabis banking sooner rather than later. Green Check has carved out a strong niche for those strategic financial institutions that want to begin banking for cannabis, according to Hart.
To learn more, visit the Green Check Verified website. Listen to the entire interview: